In 2025, after two years of volatility and adjustment, China’s hotel industry entered a period of modest recovery, though performance continued to diverge across segments and markets. On the revenue side, rooms once again became the main driver of recovery. Some tiers and markets, including five-star and four-star hotels, saw both occupancy and rates improve. The recovery in revenue and profit, however, was uneven. F&B, meetings, and other non-room income remained under pressure. Labor productivity and channel costs also continued to weigh on margins. The industry is therefore moving beyond a simple demand-led rebound. It is now in a more structural phase of adjustment, shaped by the quality of demand, channel strategy, non-room revenue conversion, and the ability of hotel organizations.
While the rooms department saw an overall recovery, hotel performance in 2025 remained uneven across location types, star ratings, positioning, and rate bands. Each category showed a different pattern of fluctuation in revenue, profit, and rooms yield.
• By Hotel Locations: Market performance in 2025 was no longer defined by city tier alone. Destination resorts regained momentum after a period of correction and returned to the top in both total revenue and operating profit, supported by strong spending on higher-quality leisure stays. Performance within first-tier cities was more mixed. Shanghai and Shenzhen held up better, helped by core business demand and higher-spending individual travelers. Beijing and Guangzhou faced greater pressure from slower business recovery, weaker high-value leisure demand, and more intense rate competition. Second-tier and third-tier cities also showed pockets of strength, especially in markets with both active tourism and a stable business base. Increasingly, a market’s ability to attract high-value demand is becoming a more important driver of performance divergence than city-tier labels alone.
• By Star Ratings: Higher-star hotels continued to show relatively stronger recovery capacity, although their operating quality was not determined by rooms revenue alone. Five-star hotels demonstrated the strongest resilience, with a clear recovery in the rooms department and some improvement in profitability. However, the increase in total revenue per available room was lower than the growth in RevPAR, indicating that non-room revenues had yet to fully recover. Four-star hotels remained squeezed by product depth, pricing power, and cost structure. They recorded a moderate recovery, but total revenue saw only limited improvement. Three-star and limited-service hotels relied on lower rates to support occupancy, while both total revenue and profit fell sharply. Therefore, the segmentation divergence seen in 2025 was essentially the result of the combined effects of pricing power, non-room revenue performance, and cost structure.
• By Room Rate Levels: From the perspective of rate positioning, the K-shaped consumption trend became more evident in 2025. Hotels with an ADR above RMB1,000 performed strongly on the back of differentiated experiences and a solid high-net-worth customer base, with key indicators continuing to improve. Hotels priced below RMB700 benefited from resilient essential demand amid tighter budgets, leading to some recovery in selected revenue and profit indicators. By contrast, hotels in the RMB701–1,000 range faced dual pressure from value compression by higher-end products and demand diversion to lower-priced alternatives, resulting in further performance pressure. This pattern of consumption stratification indicates that the industry’s competitive focus has shifted from restoring guest volume to capturing high-quality revenue, with higher-value guest, product value, and revenue structurebecoming key determinants of resilience across cycles.
